What nature can teach business, parts I and II

What nature can teach business (November 15, 2005)

Ben Teehankee

Managing For Society column, The Manila Times

Our planet is in trouble. And much of what is doing the planet harm is related to how business has been run. Problematic business practices have ranged from the manufacture of vehicles or devices that emit harmful gases to the atmosphere all the way to the use of substances, such as plastics, that are incompatible with long-term life in the planet.

Why do business practices tend to damage the environment? A major reason is that conventional business operates on increasing sales volume while minimizing costs. This strategy is expected to produce profit at the soonest possible time. We now know, however, that such an approach, especially when combined with a relentless focus on meeting numeric targets, has resulted in wasteful production, environmental degradation and the depletion of irreplaceable natural resources. Are there alternatives to the conventional approach? Can businesses achieve growth and profitability in a sustainable manner without damaging the environment?

These are major questions addressed in a doctoral course on sustainable business which I teach with colleagues from the fields of industrial ecology and engineering. The systems thinker Gregory Bateson once said that “the major problems of the world are the result of the difference between the way nature works and the way man thinks.” I decided that if I wanted answers to vexing questions of business sustainability, I should go back to nature itself for the answers. After all, nature has been around much longer than man.

A wonderful chance to learn from nature came my way when I was invited by Bro. Dennis Magbanua (principal and director of St. Joseph School -- La Salle in Bacolod) to attend a three-day marine and wildlife camp at Danjugan Island. The 43 hectare island lies in the Sulu Sea adjacent to Negros Occidental and can be reached in under 4 hours by bus and pump boat from Bacolod City. Expertly run by camp director Terence Dacles of the Philippine Reef and Rainforest Conservation Foundation and a team of specialists, the camp combined lectures with hands-on activities to help us internalize principles of natural ecology. Did you know that the Philippines is one of the biologically richest countries in the world in terms of unique living species – a situation referred to as biodiversity? Do you know how to safely hold a bat in your hands? I didn’t before the camp.

What nuggets of business management wisdom did the island share with me? The first is the ability of life forms, given normal conditions, to creatively adapt to the environment in ways that preserve their identities. For our bird-watching activities, I learned that there are 560 species of birds in the country, 170 of which are found only in the Philippines. The tendency of nature, therefore, is to promote the unique identity of species.

In business, the tendency is for firms to mechanically standardize the way they do things until they all begin to look alike. Mainly for financial reasons, banks merge and acquire each other. The resulting bigger banks promise better and more efficient service and yet, as anyone who has struggled with explaining special needs and problems to banking staff, the service in many of these merged banks has become cold and inflexible. I fear that soon the truly caring bank (not “caring” in the advertising sense) could become extinct. I was saddened to learn that the Philippines recently recorded the first extinction of one type of hornbill bird unique to the Philippines. Will caring banks go the way of this hornbill? Will the drive for greater cost efficiency and higher spreads among banks make friendly, personalized and trust-based banking service an old memory? I hope not.

The second lesson the island taught me is that everything is really related to everything else. I learned from the lectures that the coral reef is the most biologically productive of all marine ecosystems. When we snorkeled to study a coral reef near the island shore, the legendary and diverse beauty of marine life unfolded before my eyes. The way the organisms interacted and supported each other in their habitat made it easy to understand why life forms flourish in a coral reef. It’s all relational and mutual support, or what biologists call symbiosis.

In contrast, firms often make business decisions completely unconcerned about effects on others. As an example, Terrence showed us dozens of empty water bottles (from Malaysia, Indonesia and other neighboring countries) which had been swept onto the island’s shore. Businesses continue to use plastic packaging without considering the burdens on the natural environment. One lecturer recounted how a dolphin had been found starved to death because it had swallowed a plastic bag, effectively clogging its intestines and making it impossible for the dolphin to survive. Will businesses eventually learn to be responsible for the effects of what it produces on others, whether on people or the natural environment?

In next week’s final installment of this column, I will discuss how some companies have successfully adapted practices of natural living systems while staying profitable. The good news is that there are alternatives to the conventional numbers-driven approach to managing a business.

What nature can teach business - 2

Ben Teehankee

November 22, 2005

Managing For Society column, The Manila Times

In last week’s column, I shared some insights I gathered from a recent marine and wildlife camp I attended at Danjugan Island in Negros Occidental. I think that the way natural organisms adapt and sustain themselves by developing their unique identities and deepening their relationships with other organisms is nature’s living MBA course. By studying the lessons of nature, managers can develop strategies that greatly differ from the usual numbers-driven growth strategies that many companies pursue.

Just as living organisms strive to maintain their uniqueness, an excellent company also projects its unique persona in the marketplace. Southwest Airlines in the US, for example, has been known for its unique capability to give friendly, on-time, no-frills flight service to frequent US travelers. By investing heavily in recruitment and employee training, it has evolved a culture of fun service that has been unbeatable, even by the big US airlines. Many practices of the local Cebu Pacific were apparently inspired by Southwest, such as the in-flight games and the emphasis on punctuality.

The profitability of Southwest has been consistent throughout its 34-year history, even as other US airlines have fallen by the wayside in the cutthroat airline industry. Its profitability so impressed capital market analysts that it was often pressured to grow faster. Founder and former CEO Herb Kelleher explained simply that the airline could only grow at the rate it could recruit the unique kind of people so essential to its corporate culture and community. Southwest refuses to grow for purely financial reasons, especially if it will endanger its core values, which include the Golden Rule, servant leadership and fun.

A model of using relationships for efficiency and responsiveness is Toyota. Toyota makes sure that people who design the cars stay in close touch with those who build them. Based on such close interaction, engineers will not design vehicles which cannot be built efficiently. For example, Toyota engineers follow a design principle that says “Thou shall not design a vehicle lacking certain precise locator points.” Locator points are where steel pins on the car’s assembly line securely grip the car's floor as it moves along during production.

Locator points make it easy for Toyota’s factory robots to weld car bodies of different types easily and exactly – in the same production line – with a few quick changes in software. The close relationship between design and manufacturing in Toyota makes it unnecessary to produce too many units in a production run. Although making as many units in one production run has been taught as a principle of manufacturing efficiency for decades, this wasteful practice is now being replaced by flexible manufacturing systems such as Toyota’s. The financial dividends are enormous. Toyota has not reported an accounting loss since 1960 and its market capitalization is almost equal to the total of GM, Ford and Chrysler combined. Most impressive to me is that Toyota achieved this without resorting to layoffs – more proof of how it values relationships.

Southwest and Toyota are good examples of “living companies”. Arie de Geus, author of The Living Company and a 38-year veteran manager and planner of the Royal Dutch/Shell Group, argues that companies should not be seen as money making machines but rather as “living beings”. He differentiates the “economic company” from a “living company”. The first company type measures success mainly through profit and the optimum combination of production factors. The second type measures success mainly through its capacity to learn effectively. De Geus explains that only living things are capable of adaptive learning, and only through such people-based learning can a company assure its long-term survival.

Business remains a powerful force for socio-economic development in the world today. But unless managers learn to be more attuned to nature’s lessons, they will continue, in the name of profit, to force impossible demands on their people and their processes, and ultimately on the environment itself. Such an approach will guarantee a world that is becoming more profitable on paper but is, in reality, being choked to death. Today’s managers are challenged to manage with more wisdom and to unlearn the wasteful practices of the past. Our collective future depends on it.

Dr. Ben Teehankee is the Sen. Benigno S. Aquino associate professor of corporate social responsibility and governance and Planning and Research Director of De La Salle Professional Schools, Inc. Email him at teehankeeb@dlsu.edu.ph.